Korea Federation of SMEs Strengthens Financial Support by Lowering Loan Interest Rates for SMEs

Loan Interest Rates for SME Mutual Aid Fund to Drop by Up to 0.30 Percentage Points Starting July 1

The Korea Federation of SMEs announced on June 30 that it will lower the loan interest rates of the SME Mutual Aid Fund starting July 1. This interest rate adjustment is a measure to reduce the financial burden on SMEs and small business owners and to improve their access to financing, in response to recent changes in financial conditions such as the economic slowdown and contraction in the money market.

With this measure, the loan interest rates of the SME Mutual Aid Fund will be reduced by up to 0.30 percentage points. ▲Short-term operating funds loans will be lowered to an annual rate of 4.00-8.69% ▲Bill and check loans to an annual rate of 4.00-7.42% ▲Real estate collateral loans to 4.25%. For small business owners who are facing particular difficulties due to sluggish domestic demand, the Yellow Umbrella-linked loan for small businesses will be reduced by 0.30 percentage points to an annual rate of 5.20%.

If combined with the local government interest subsidy program, which supports 1-2 percentage points of loan interest, the effective interest rate will be even lower, resulting in significant cost savings for financing. The maturity interest rate for mutual aid deposits (3 to 5 years) will also be adjusted by 0.25 percentage points from 3.25% to 3.0% per year, in line with the Bank of Korea’s base rate and market interest rate cuts.

The SME Mutual Aid Fund is a program established in 1984 under the ‘Small and Medium Enterprise Cooperative Act’. SMEs and small business owners can utilize loans such as defaulted sales receivables loans, bill and check loans, and operating funds loans, using funds raised from their own contributions and government grants.

Members can use credit loans up to three times the balance of their contributions, depending on their credit rating, and if the credit loan limit is insufficient, they can use real estate collateral loans up to ten times the balance. In addition, small business owners who have been enrolled in the Yellow Umbrella Mutual Aid for more than three years can receive Yellow Umbrella-linked loans for small businesses up to ten times the balance of their contributions after joining the Mutual Aid Fund. Currently, about 17,000 SMEs and small business owners nationwide are enrolled, and approximately 690 billion won in loans were provided over the past year.